Weatherford Democrat

Aledo ExtrA

January 20, 2014

Willow Park looks to revenue bonds to fund water lines


WILLOW PARK – The Willow Park City Council Tuesday night advised staff to begin working towards issuing certificates of obligation bonds to finance $685,000 in water line upgrades.

The improvements primarily include upgrades to main water lines made of cast iron running along portions of Ranch House Road, as well as water lines running off to nearby residential streets. After the city applied for funding help from the Texas Water Development Board in 2012, the TWDB offered to extend $685,000 in assistance.

“The funding from the Texas Water Development Board ... is their promise to buy the bonds if we choose to issue them,” council member Gene Martin explained to the few residents who attended the public hearing.

The city will see a reduced interest rate by working with the TWDB.

The cast-iron lines slated for replacement were responsible for 12 main water line breaks over the past 12 months, half of all the water line breaks in the city, officials said. One occurred on Ranch House Road on Christmas Day, according to Mayor Richard Neverdousky.

“I think that is indicative of what you’ll see going back, probably years,” said Derek Turner, an engineer with Jacob & Martin.

City staff prioritized replacing lines based on the frequency of breaks, water loss and location. The city’s engineer further evaluated them for impact on the water system, according to Turner.

The available $685,000 loan from the TWDB is sufficient to cover the first six of nine line replacement priorities, the city’s remaining cast-iron lines. Replacing all nine lines is estimated to cost a total of $920,000.

The first priority is a 6-inch line running from Crown Road to Squaw Creek parallel to a new 12-inch line. The city plans to abandon the line in place and tie in main lines and service lines to the newer line.

The second priority involves lines running along Ranch House Road from the north side of Interstate 20 to Trinity Drive. The cast-iron pipe was not installed properly, with most of it sitting on solid rock, rather than a bed of sand, according to Petty.

“The legalese [in the bonds] will have language that says the bonds will be paid back based, at least partially, from property tax,” Martin said. “The other option is to have the bonds paid back through revenue stream. If I remember correctly, the bond expert stated that the probably the best salable bonds for our purpose would be both – property tax and revenue-bearing. The analysis, at least the rough analysis that we’ve seen, indicates that the revenue from the water system would be sufficient over the life of this if we went the (certificates of obligation) route, that the revenue stream would be sufficient to pay the loan off so it would not affect the property tax.”

City Administrator Matt Shaffstall compared it to buying a car with your spouse to qualify for a better loan package but only one pays the note.

“You are pledging both, which gives you a better rate, but the analysis all indicates there is sufficient revenue in the water to pay the note,” Shaffstall said.

“It needs to be done. I don’t think there’s any doubt. It needs to be done because we’ve had water issues forever,” resident David Fritz said. “I think no matter which option council goes with, council would be well served to broadcast every nuance so that the public can be on board with you and not feel left out.”

“We’ve been here for 33 years, about the time the city bought the water system, so we’ve seen the system being fixed over the years and over the years and over the years,” one resident said. “Will this, this cast iron pipe problems, will this take care of the problems we’ve seen over the years to where there will just be regular maintenance or new pipes added for divisions or businesses or whatever?”

Replacing the cast iron pipes with C900 PVC pipe reduce nearly 100 percent of maintenance on those lines, Petty told her.

“I think that would need to get out to the public,” the woman said.

Councilman Bernard Suchocki said he sees not only a water leakage issue but a water quality issue and called the decision to seek certificates of obligation funding rather than general obligation funding a difficult one.

Voters would have to approve a general obligation bond and it would take more time and money to do so, council was told. The city council could approve certificates of obligation funding within in the next few months, taking advantage of better interest rates and meeting the TWDB deadline, city staff said.

“You’ve heard me say I’m highly interested in lowering tax rates but my concern is any debt we take on, if debt is going to affect the tax rate, then I’m firm in wanting it to be blessed by a vote of citizens, Martin said. “If we can do the CO based on a revenue stream, I’m in favor of a CO.”

The city is in the midst of a rate study that would allow for adjustment of revenue from the water system to pay the bonds, Neverdousky reminded the council.

Council member Amy Podany argued for going the general obligation bond route, saying she believed it was time for the city to do more for the water system than just replace iron pipes and would like to see it put to voters.

With most council members advising they wanted to pursue certificates of obligation funding for $685,000, staff was advised to begin preparing and bring it back to city council for consideration.

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